Your legal structure changes more about your Professional Indemnity (PI) cover than most people realise. The premium, the naming on the policy schedule, the run-off obligations on closure, the way liability flows between the firm and the individuals, and even the question of whether a personal action against you would be insured all depend on whether you trade as a sole trader, a partnership, a limited liability partnership (LLP), or a limited company.
This guide sets out how each structure interacts with PI cover in the UK. It is written for owners and principals choosing between structures (typically at start-up, scale-up, or restructuring) and for existing firms reviewing whether their current structure still suits their PI exposure. We assume you are familiar with the basics of PI cover; if not, see our Professional Indemnity Insurance overview.
The article is not company-law or tax advice — it focuses on the insurance dimension. The structural decision usually has tax, regulatory, succession-planning and liability dimensions that need separate professional advice.
The four main structures in scope
For PI purposes, four UK structures cover the great majority of professional firms:
Sole trader — an individual trading in their own name (or under a trading name), with no separate legal entity. The individual is the business. Most freelance consultants, single-handed professionals, and very small one-person practices trade this way.
Traditional partnership — two or more individuals carrying on business in common with a view to profit, under the Partnership Act 1890. Each partner has unlimited personal liability for the partnership's debts, including PI claims. Common historically among professional firms; less common now since LLP became available.
Limited liability partnership (LLP) — a body corporate created under the Limited Liability Partnerships Act 2000. Members have limited liability for the LLP's debts, but each member remains personally liable for their own professional negligence. Common among medium and large professional firms — solicitors, accountants, surveyors.
Limited company — a private company limited by shares (or by guarantee). Shareholders have limited liability for the company's debts. Directors and employees can have personal liability for their own conduct in defined circumstances, but the company is a separate legal person. Common among consultants, contractors, design and engineering firms, and any firm that wants the company structure for tax or commercial reasons.
We touch briefly at the end on community interest companies, charitable structures, and public limited companies — which raise additional considerations.
Sole traders — the simplest PI position
For a sole trader, the insurance position is the simplest of the four:
Who is insured. The individual, in their personal capacity, trading as the business. There is no entity separate from the individual to name on the policy. Any employees can usually be added as additional insureds.
Personal liability. Unlimited. A judgment against the business is a judgment against the individual. If the PI policy does not respond — wrong cover, exhausted limit, exclusion applies — the individual's personal assets are exposed.
Policyholder name. The individual's full legal name, typically with the trading name in brackets ("Jane Smith trading as Smith Consulting"). The policy schedule will state insured activities and insured income, but the named insured is the person.
Premium. Generally the cheapest structure for PI cover at small scale, because the risk is contained to one individual's work and the underwriting is simple.
Run-off. A sole trader who closes down or retires needs to arrange run-off cover personally. The run-off attaches to the individual, who must fund it directly. Six years is the typical baseline.
Tax efficiency. Premium is deductible against trading profits as a business expense (assuming the cover is for the business activity, not personal liability outside the business).
Where sole-trader status hits friction. A sole trader signing contracts in their personal name has the contract and the liability flowing through them personally. Large corporate clients sometimes prefer to contract with a limited company. Lenders, mortgage providers, and certain frameworks may not contract with sole traders at all. These are commercial considerations rather than insurance ones, but they often drive a structural change that has insurance consequences.
Traditional partnerships — joint and several liability, still in use
Traditional partnerships under the Partnership Act 1890 remain common in some professional fields — notably small accountancy firms, some legal practices that have not converted to LLP, and family-run consultancies.
Who is insured. The partnership in its trading name, with each partner named individually as an insured. The policy schedule typically lists the partners. New partners need to be added by endorsement.
Personal liability. Unlimited and joint and several. Each partner is personally liable for partnership debts, including PI claims, even if the work was done by another partner. This is the defining feature of a traditional partnership and the reason most professional firms migrated to LLP.
Policyholder name. The partnership name, with named partners on the schedule.
Premium. Usually similar to a comparably-sized limited company, sometimes slightly higher because of joint-and-several liability concerns.
Run-off. On dissolution, run-off cover attaches to the former partners. Each retiring partner needs assurance that run-off is in place covering them for past partnership work — typically funded by the continuing firm where there is one, or paid jointly by the dissolving partners.
Where partnership status hits friction. The unlimited joint-and-several liability is the single biggest issue. A partner's personal assets are at risk for another partner's negligence. PI cover protects against insured claims; it does not protect against the personal-asset exposure when the policy is exhausted or when an excluded matter arises. For this reason, traditional partnership is rarely chosen now for new professional firms in the UK.
Limited liability partnerships — the structure most professional firms use now
LLP combines the partnership tax treatment (members taxed as partners, not as employees) with limited liability protection for the members.
Who is insured. The LLP as the named insured. Members are usually defined as additional insureds for their work for the LLP. Employees are also covered.
Personal liability. The LLP is a separate legal person with limited liability. A judgment against the LLP does not automatically attach to the members' personal assets. However, a member remains personally liable for their own negligent acts — under the common-law principle that you cannot escape your own tort by hiding behind a corporate structure. This means a client suing a member for personal negligence can still attach the member individually, in addition to (or instead of) the LLP.
The PI policy generally responds to claims against the LLP and against members for work done in the LLP's name. The personal-liability point is the key reason members of an LLP need PI cover on the LLP — to protect themselves as well as the firm.
Policyholder name. The LLP's registered name, ending "LLP". Members are typically listed on the schedule.
Premium. Comparable to a limited company of similar size, sometimes slightly higher reflecting the partnership-like risk profile.
Run-off. On winding up the LLP, run-off cover attaches to the former entity and protects past members. Six years' run-off is the typical baseline; longer for firms with deed-based engagements (twelve years' limitation under English law).
Where LLP suits. LLP is the dominant structure for medium and large UK professional firms — solicitors, accountants, surveyors, consultants — because it combines limited liability with partnership-style profit-sharing and management. PI cover for LLPs is a well-developed market.
Limited companies — most consultants, contractors and small practices
Limited company is now the most common structure for new professional service businesses below partnership scale — consultants, freelancers, contractors, design and engineering firms.
Who is insured. The company as the named insured. Directors and employees are typically additional insureds. Shareholders are not insured in their capacity as shareholders (they would not be liable as shareholders anyway).
Personal liability. Limited at the company level. A judgment against the company stops at the company. A director's personal liability for their own negligence still exists — under the same common-law principle as for LLP members. A director acting personally for the company who is negligent can be sued personally as well as the company. In practice, professional negligence claims against a small consultancy usually name both the company and the director, and the PI policy responds to both.
The director's personal-liability point is the reason limited-company contractors still need PI cover — even though the company itself has limited liability, the director can be sued personally and would not benefit from the company's limitation.
Policyholder name. The company's registered name (ending "Limited" or "Ltd"). Directors usually listed.
Premium. Comparable to a sole-trader policy of similar income, sometimes slightly higher reflecting that the company structure can produce slightly more complex claims (directors' liability, contractual claims via the company).
Run-off. When the company is dissolved, run-off cover attaches to the dissolved entity and protects former directors and the former company against late-notified claims. Six years' baseline. Some directors arrange personal run-off separately if the company is being struck off without funds for run-off — the cost is then personal.
The strike-off trap. A small limited company struck off the Companies House register ceases to exist legally. A claim arising six years later cannot be brought against a struck-off company unless the company is restored. If no run-off was arranged before strike-off, the cover position becomes complex and any director-personal claim becomes uninsured. Directors winding up a limited company should arrange run-off before strike-off, not after.
Where limited company suits. Limited company is the right choice for consultants and contractors wanting a separate legal entity for commercial, tax, and limited-liability reasons. The PI cover sits naturally on the company. For freelancers and contractors specifically, see our dedicated guide: PI Insurance for Freelancers and Contractors.
How structure affects the four insurance dimensions
Pulling together the four structures across the four key insurance variables:
Naming on the policy
- Sole trader: individual's name, often with trading name.
- Partnership: partnership name with partners listed.
- LLP: LLP registered name with members typically listed.
- Limited company: company registered name with directors typically listed.
The accuracy of the named insured on the schedule matters. A policy issued to "Smith Consulting Ltd" does not respond to a claim against "Jane Smith trading as Smith Consulting" — they are different legal persons. If you change structure, update the policy schedule.
Personal liability after the policy responds
- Sole trader: unlimited personal exposure for any claim not fully indemnified.
- Partnership: unlimited joint-and-several exposure for partners.
- LLP: limited exposure for the LLP; members personally liable for own negligence.
- Limited company: limited exposure for the company; directors personally liable for own negligence.
In all four cases, adequate PI limits matter. The structure does not make low limits safe.
Run-off on closure
- Sole trader: individual arranges and funds personally.
- Partnership: partners jointly arrange, often through continuing firm.
- LLP: LLP arranges before dissolution; members protected for past work.
- Limited company: company arranges before strike-off; directors protected.
Run-off must be set up before the entity ceases to exist. Setting up run-off after strike-off is awkward at best.
Premium
Differences are usually modest — driven mainly by income, profession, claim history and limits. The structure itself rarely makes a large premium difference at small and mid scale. At larger scale (£500k+ fee income), more complex structures sometimes attract slightly higher premiums reflecting the more complex risk profile.
Common scenarios — which structure should you be on?
These are common scenarios where the structural question recurs:
The sole-trader consultant earning £80k who wants to incorporate. PI implications: a new limited company policy is needed; the previous sole-trader policy needs run-off arranged or roll-over into the new policy with full retroactive cover; any client contracts need to be novated to the new company. The change is straightforward but the retroactive-cover question must be addressed at the placement.
Two consultants forming a partnership. PI implications: a partnership policy with both partners named is needed; each partner is jointly and severally liable so the limit needs to reflect the combined work; many similar pairings now choose LLP from the outset rather than traditional partnership.
A practice converting from partnership to LLP. PI implications: the LLP is a new legal entity, so the policy needs to be re-issued in the LLP's name with full retroactive cover going back to before the original partnership started; the old partnership entity may need run-off (or the new LLP policy's retroactive cover may suffice — confirm with the insurer).
A scale-up consultancy considering converting from limited company to LLP. PI implications: usually less PI-driven than tax-driven, but the policy reissue mechanics are similar; ensure retroactive cover continuity.
A retiring sole practitioner. PI implications: arrange run-off cover for at least six years (longer if any unexpired deed-based engagements are on file).
A small limited company winding up. PI implications: arrange run-off before strike-off; consider whether directors need any personal run-off in their own names; if the company is to be dissolved with no successor entity, run-off is the only mechanism preserving cover.
Trading-name and group-company complications
A few additional wrinkles that come up regularly:
Multiple trading names under one entity. A limited company can trade under multiple names. The PI policy should list all trading names — a claim against "Acme Consulting" when the policy says "Acme Services Ltd t/a Smith Consultancy" may produce coverage uncertainty.
Group-company structures. A holding company with operating subsidiaries usually needs the policy to identify all insured entities. A holding-only policy does not respond to claims against a subsidiary. The cleanest approach is a group PI policy listing each insured entity.
Sole director acting personally. Where a sole director of a limited company also does some work personally (consultancy work outside the company), the personal work is not covered by the company policy. Either route the work through the company or take a personal extension.
Spouse or family-member-named businesses. Where the trading business and the contracting party are different — for example, a husband-and-wife consultancy where one name is on the trading and the other on certain contracts — the policy must name all relevant insureds.
How Apex helps
We help clients place PI cover that reflects their actual legal structure, and we review the structural fit at renewal. Where a client is contemplating a structural change — converting to LLP, incorporating from sole trader, dissolving a partnership — we work through the PI consequences in parallel with the client's accountant or solicitor handling the tax and corporate dimensions.
We are an independent, FCA-authorised broker (firm reference 724952). The contact page is the place to start a placement or restructuring conversation.
Frequently asked questions
Does a limited company need PI insurance?
A limited company providing professional services is the entity that contracts with clients, so PI cover is usually held in the company's name. Directors acting personally for the company can be sued individually for their own negligence, so the cover protects the director as well as the company. Whether PI is required depends on the profession and any regulator minimum terms.
Do sole traders pay more for PI than limited companies?
Generally no, at comparable income and risk profile. Some insurers price slightly lower for sole traders because the risk is contained to one individual; others price slightly higher because there is no corporate buffer. The difference is usually modest.
If my limited company is dissolved, am I still personally liable for old work?
Possibly yes. A claim alleging your personal negligence as a director can be brought against you personally even after the company is dissolved, particularly within the limitation period. Run-off cover protecting the director personally is the mechanism for this. Arrange run-off before strike-off, not after.
Are LLP members covered for their own personal negligence?
The LLP's PI policy typically covers claims against members for work done in the LLP's name, in addition to claims against the LLP itself. Read the policy's definition of insured persons. A member sued personally for own-work negligence is usually covered; check the wording rather than assume.
Can a partnership policy follow a partner into a new firm?
No. The PI policy is tied to the entity that holds it. A partner leaving an old firm to join or start a new one needs PI cover for the new firm; the old firm's policy continues to respond (as run-off if the old firm dissolves) to claims relating to that partner's work at the old firm.
Do I need separate PI cover for each company in a group?
Generally yes, unless a group PI policy is placed naming each company as a separate insured. The default is one policy per insured entity. Group placements are common at mid and large scale; below that the simpler approach is one policy per company.
What happens to my PI if I incorporate from sole trader to limited company?
A new policy in the company's name is required. The old sole-trader policy needs run-off (typically six years) or, more commonly, the new company policy is written with retroactive cover extending back to your sole-trader work — meaning the new policy responds to claims relating to the old work. Confirm the retroactive date explicitly at the placement.
Does my PI cover claims against me as a director under the Companies Act?
Standard PI covers professional service liability. Director liability under the Companies Act (mismanagement, breach of duty to the company) is a separate area covered by Directors and Officers (D&O) insurance, not PI. Check whether your business needs D&O alongside PI.
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Related guides
- Professional Indemnity Insurance overview
- PI Insurance for Freelancers and Contractors
- Should I use a PI broker or buy direct?
- Does my professional body require PI insurance?
- Contact Apex Insurance Brokers
About Apex Insurance Brokers — Apex Insurance Brokers Limited is authorised and regulated by the Financial Conduct Authority, FCA firm reference 724952. Registered in England and Wales, Companies House 07014570. Last reviewed: May 2026.